Use the information for Lalonde and Costner from BE20–2. Explain, using numbers, how Costner determined the amount of the lease payment of $25,173.
In BE Lalonde Ltd., a public company following IFRS, recently signed a lease for equipment from Costner Ltd. The lease term is five years and requires equal rental payments of $25,173 at the beginning of each year. The equipment has a fair value at the lease’s inception of $112,400, an estimated useful life of five years, and no residual value. Lalonde pays all executory costs directly to third parties. The appropriate interest rate is 6%. Prepare Lalonde’s journal entries at the inception of the lease.